##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-7584
 TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    74-1079400(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)2800 Post Oak BoulevardP. O. Box 1396Houston, Texas
    
    77251(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code (713) 215-2000
 None
(Former name, former address and former fiscal year, if changed since last report)
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
 Yes þ No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act.
 Large accelerated filer o Accelerated filer o Non-accelerated filer þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
 Yes o No þ
 The number of shares of Common Stock, par value $1.00 per share, outstanding as of October 31,
2007 was 100.
 REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H (1)2
(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.




---



##### 



PagePART I. FINANCIAL INFORMATION:Item 1. Financial Statements -Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2007 and 2006
    
    
    4Condensed Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006
    
    
    5Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Narrative Analysis of the Results of Operations
    
    
    14Item 4. Controls and Procedures
    
    
    18PART II. OTHER INFORMATION
    
    
    19Item 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19Item 6. Exhibits
    
    
    19Certification of Principal Executive Officer Pursuant to Section 302Certification of Principal Financial Officer Pursuant to Section 302Certification Pursuant to Section 906
    
    
    Amounts and nature of future capital expenditures;
    
    Expansion and growth of our business and operations;
    
    Business strategy;
 2




---



##### Table of Contents




    
    Cash flow from operations;
    
    Power and natural gas prices and demand.
  
    
    Availability of supplies (including the uncertainties inherent in assessing and
estimating future natural gas reserves), market demand, volatility of prices, and
increased costs of capital;
    
    Inflation, interest rates and general economic conditions;
    
    The strength and financial resources of our competitors;
    
    Development of alternative energy sources;
    
    The impact of operational and development hazards;
    
    Costs of, changes in, or the results of laws, government regulations including
proposed climate change legislation, environmental liabilities, litigation, and rate
proceedings;
    
    Changes in the current geopolitical situation;
    
    Risks related to strategy and financing, including restrictions stemming from our
debt agreements and our lack of investment grade credit ratings; and
    
    Risk associated with future weather conditions and acts of terrorism.
    3




---



##### Table of Contents



PART 1  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements.
  
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Operating Revenues:Natural gas sales
    
    $
    36,546
    
    
    $
    41,076
    
    
    $
    127,785
    
    
    $
    108,959Natural gas transportation
    
    
    215,059
    
    
    
    188,518
    
    
    
    627,245
    
    
    
    571,320Natural gas storage
    
    
    36,036
    
    
    
    29,867
    
    
    
    104,402
    
    
    
    89,883Other
    
    
    1,047
    
    
    
    2,355
    
    
    
    17,546
    
    
    
    12,057Total operating revenues
    
    
    288,688
    
    
    
    261,816
    
    
    
    876,978
    
    
    
    782,219Operating Costs and Expenses:Cost of natural gas sales
    
    
    36,547
    
    
    
    41,067
    
    
    
    127,715
    
    
    
    108,948Cost of natural gas transportation
    
    
    3,005
    
    
    
    2,663
    
    
    
    8,446
    
    
    
    9,237Operation and maintenance
    
    
    55,698
    
    
    
    56,441
    
    
    
    167,094
    
    
    
    162,272Administrative and general
    
    
    36,647
    
    
    
    48,121
    
    
    
    114,339
    
    
    
    116,038Depreciation and amortization
    
    
    57,590
    
    
    
    51,530
    
    
    
    168,762
    
    
    
    154,117Taxes  other than income taxes
    
    
    11,424
    
    
    
    12,741
    
    
    
    40,002
    
    
    
    39,413Other (income) expense, net
    
    
    4,143
    
    
    
    (2,592
    )
    
    
    8,468
    
    
    
    (7,405
    )Total operating costs and expenses
    
    
    205,054
    
    
    
    209,971
    
    
    
    634,826
    
    
    
    582,620Operating Income
    
    
    83,634
    
    
    
    51,845
    
    
    
    242,152
    
    
    
    199,599Other (Income) and Other Deductions:Interest expense
    
    
    24,097
    
    
    
    23,489
    
    
    
    70,721
    
    
    
    61,503Interest income  affiliates
    
    
    (3,830
    )
    
    
    (4,310
    )
    
    
    (11,755
    )
    
    
    (10,867
    )Allowance for equity and borrowed funds used
during construction (AFUDC)
    
    
    (5,463
    )
    
    
    (3,161
    )
    
    
    (10,176
    )
    
    
    (8,530
    )Equity in earnings of unconsolidated affiliates
    
    
    (1,717
    )
    
    
    (1,983
    )
    
    
    (5,114
    )
    
    
    (5,729
    )Miscellaneous other (income) deductions, net
    
    
    (2,933
    )
    
    
    (1,859
    )
    
    
    (7,453
    )
    
    
    (4,973
    )Total other (income) and other deductions
    
    
    10,154
    
    
    
    12,176
    
    
    
    36,223
    
    
    
    31,404Income before Income Taxes
    
    
    73,480
    
    
    
    39,669
    
    
    
    205,929
    
    
    
    168,195Provision for Income Taxes
    
    
    27,927
    
    
    
    15,320
    
    
    
    78,632
    
    
    
    64,009Net Income
    
    $
    45,553
    
    
    $
    24,349
    
    
    $
    127,297
    
    
    $
    104,186
  4




---



##### Table of Contents



September 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent Assets:Cash
    
    $
    117
    
    
    $
    315Receivables:Affiliates
    
    
    5,327
    
    
    
    7,814Advances to affiliates
    
    
    152,780
    
    
    
    190,399Others, less allowance of $503 ($503 in 2006)
    
    
    100,108
    
    
    
    84,445Transportation and exchange gas receivables
    
    
    13,413
    
    
    
    7,075Inventories
    
    
    70,131
    
    
    
    64,821Deferred income taxes
    
    
    20,726
    
    
    
    17,414Other
    
    
    40,562
    
    
    
    28,557Total current assets
    
    
    403,164
    
    
    
    400,840Investments, at cost plus equity in undistributed earnings
    
    
    44,866
    
    
    
    44,820Property, Plant and Equipment:Natural gas transmission plant
    
    
    6,780,551
    
    
    
    6,475,172Less-Accumulated depreciation and amortization
    
    
    2,056,486
    
    
    
    1,939,430Total property, plant and equipment, net
    
    
    4,724,065
    
    
    
    4,535,742Other Assets
    
    
    247,291
    
    
    
    300,587Total assets
    
    $
    5,419,386
    
    
    $
    5,281,989
  5




---



##### Table of Contents



September 30,
    
    
    December 31,2007
    
    
    2006LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Payables:Affiliates
    
    $
    19,004
    
    
    $
    23,007Other
    
    
    122,922
    
    
    
    113,418Transportation and exchange gas payables
    
    
    16,438
    
    
    
    14,693Accrued liabilities
    
    
    170,955
    
    
    
    112,062Current maturities of long-term debt
    
    
    174,979
    
    
    
    Total current liabilities
    
    
    504,298
    
    
    
    263,180Long-Term Debt
    
    
    1,027,155
    
    
    
    1,201,458Other Long-Term Liabilities:Deferred income taxes
    
    
    1,035,552
    
    
    
    1,013,282Other
    
    
    265,696
    
    
    
    265,633Total other long-term liabilities
    
    
    1,301,248
    
    
    
    1,278,915Contingent liabilities and commitments (Note 3)Common Stockholders Equity:Common stock $1.00 par value:100 shares authorized, issued and outstanding
    
    
    
    
    
    
    Premium on capital stock and other paid-in capital
    
    
    1,652,430
    
    
    
    1,652,430Retained earnings
    
    
    962,149
    
    
    
    914,851Accumulated other comprehensive loss
    
    
    (27,894
    )
    
    
    (28,845
    )Total common stockholders equity
    
    
    2,586,685
    
    
    
    2,538,436Total liabilities and stockholders equity
    
    $
    5,419,386
    
    
    $
    5,281,989
  6




---



##### Table of Contents



Nine Months EndedSeptember 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    127,297
    
    
    $
    104,186Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    169,920
    
    
    
    152,361Deferred income taxes
    
    
    18,369
    
    
    
    46,882Allowance for equity funds used during construction (Equity AFUDC)
    
    
    (7,420
    )
    
    
    (6,380
    )Changes in operating assets and liabilities:Receivables  affiliates
    
    
    2,487
    
    
    
    (1,362
    ) others
    
    
    (15,663
    )
    
    
    6,983Transportation and exchange gas receivables
    
    
    (6,338
    )
    
    
    (1,284
    )Inventories
    
    
    (5,310
    )
    
    
    (7,919
    )Payables  affiliates
    
    
    (4,003
    )
    
    
    (7,760
    ) others
    
    
    (4,660
    )
    
    
    (3,195
    )Transportation and exchange gas payables
    
    
    1,745
    
    
    
    (23,112
    )Accrued liabilities
    
    
    58,893
    
    
    
    (49,643
    )Other, net
    
    
    24,219
    
    
    
    (15,611
    )Net cash provided by operating activities
    
    
    359,536
    
    
    
    194,146Cash flows from financing activities:Additions of long-term debt
    
    
    
    
    
    
    200,000Debt issue costs
    
    
    (10
    )
    
    
    (3,187
    )Change in cash overdrafts
    
    
    (894
    )
    
    
    (2,023
    )Common stock dividends paid
    
    
    (80,000
    )
    
    
    (95,000
    )Net cash provided by (used in) financing activities
    
    
    (80,904
    )
    
    
    99,790Cash flows from investing activities:Property, plant and equipment:Additions, net of equity AFUDC
    
    
    (314,121
    )
    
    
    (265,066
    )Changes in accounts payable
    
    
    15,058
    
    
    
    16,032Advances to affiliates, net
    
    
    37,619
    
    
    
    (43,384
    )Advances to others, net
    
    
    651
    
    
    
    745Other, net
    
    
    (18,037
    )
    
    
    (2,435
    )Net cash used in investing activities
    
    
    (278,830
    )
    
    
    (294,108
    )Net decrease in cash
    
    
    (198
    )
    
    
    (172
    )Cash at beginning of period
    
    
    315
    
    
    
    362Cash at end of period
    
    $
    117
    
    
    $
    190
  7




---



##### Table of Contents



TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. BASIS OF PRESENTATION
    
    8




---



##### Table of Contents



Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    45,553
    
    
    $
    24,349
    
    
    $
    127,297
    
    
    $
    104,186Equity interest in unrealized gain/(loss) on interest rate
hedge, net of tax
    
    
    (132
    )
    
    
    (150
    )
    
    
    (18
    )
    
    
    134Pension benefits, net of taxAmortization of prior service credit
    
    
    (256
    )
    
    
    
    
    
    
    (767
    )
    
    
    Amortization of net actuarial loss
    
    
    579
    
    
    
    
    
    
    
    1,736
    
    
    
    Total comprehensive income
    
    $
    45,744
    
    
    $
    24,199
    
    
    $
    128,248
    
    
    $
    104,320
     9




---



##### Table of Contents



FERC Accounting and Reporting Guidance
   2. RATE AND REGULATORY MATTERS
  
 3. CONTINGENT LIABILITIES AND COMMITMENTS
 Legal Proceedings
  10




---



##### Table of Contents



Environmental Matters
    11




---



##### Table of Contents



Safety Matters
 Pipeline Integrity Regulations
 12




---



##### Table of Contents



Other Matters
  Summary
  Other Commitments
 Commitments for construction and gas purchases
 Guarantees
  4. DEBT AND FINANCING ARRANGEMENTS
 Revolving Credit and Letter of Credit Facilities
   13




---



##### Table of Contents



Current Maturities of Long-Term Debt
  5. TRANSACTIONS WITH AFFILIATES
       
 ITEM 2. Managements Narrative Analysis of Results of Operations.
 General
  14




---



##### Table of Contents



RESULTS OF OPERATIONS
 Operating Income and Net Income
  Transportation Revenues
   
 Nine monthsEnded September 30,Transco System Deliveries (TBtu)
    
    2007
    
    
    2006Market-area deliveries:Long-haul transportation
    
    
    621.7
    
    
    
    588.5Market-area transportation
    
    
    662.5
    
    
    
    621.4Total market-area deliveries
    
    
    1,284.2
    
    
    
    1,209.9Production-area transportation
    
    
    146.0
    
    
    
    191.2Total system deliveries
    
    
    1,430.2
    
    
    
    1,401.1Average Daily Transportation Volumes (TBtu)
    
    
    5.2
    
    
    
    5.1Average Daily Firm Reserved Capacity (TBtu)
    
    
    6.5
    
    
    
    6.6
 15




---



##### Table of Contents



Sales Revenues
   
 Storage Revenues
  Other Revenues
  16




---



##### Table of Contents



Operating Costs and Expenses
  Other Income and Other Deductions
  Capital Expenditures
  Leidy to Long Island Expansion Project
 Potomac Expansion Project
 Sentinel Expansion Project
 17




---



##### Table of Contents



Pascagoula Expansion Project
 
 ITEM 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Third Quarter 2007 Changes in Internal Control over Financial Reporting
  18




---



##### Table of Contents



       1
    
    Certification of Principal Executive Officer pursuant to
Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of
1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.       2
    
    Certification of Principal Financial Officer pursuant to
Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of
1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
  
    
    Certification of Principal Executive Officer and Principal
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 19




---



##### Table of Contents



TRANSCONTINENTAL GAS PIPE LINE CORPORATION 
(Registrant)Dated: November 5, 2007
    
    By /s/ Jeffrey P. HeinrichsJeffrey P. HeinrichsController(Principal Accounting Officer)
 20